US mining and exploration investment falls

Mining and exploration investment declined 35% in 2015, the second largest year-over-year decline since the US Bureau of Economic Analysis (BEA) began reporting the series in 1948. Most mining and exploration investment reflects petroleum exploration and development, but the category also includes natural gas, coal and other minerals.

Mining and exploration investment declined from US$135 billion in 2014 to US$87.7 billion in 2015, weighing down investment growth more than any other segment of non-residential investment. Total private fixed investment, of which mining and exploration is a small subset, grew 4% in 2015 to US$2.7 trillion. Low commodity prices remain a significant factor in US firms' investment decisions.

US gross domestic product (GDP) grew 2.4% in 2015, according to 4Q15 and annual 2015 advance estimates by BEA, the same rate as in 2014. Gross private domestic investment contributed 0.8% to the 2.4% GDP growth in 2015. BEA tracks several types of private investment, broadly split into residential and non-residential.

Within non-residential are three categories: equipment (such as industrial and transportation equipment), intellectual property products (such as software and entertainment) and structures (which includes mining and exploration but also commercial, manufacturing, power, and communication structures).

Mining and exploration investment as a share of total private investment declined from 5.2% in 2014 to slightly more than 3% in 2015. Low oil prices remain a major factor in oil exploration and production firms' decisions to reduce capital expenditure. 4Q15 earnings statements from US oil companies indicate plans to further reduce CAPEX to balance spending with lower cash flows until crude oil prices increase enough to make investments economic. These oil-company reductions could continue to put downward pressure on investment spending in the broader US energy sector.